KordaMentha called in as receivers to struggling WA gold miner Calidus
Calidus Resources appears to be the latest victim of a hedge book gone bad, with the company going under despite strong gold prices.
WA gold miner Calidus Resources has collapsed only months after raising $22.5m from the market and restructuring its debts.
KordaMentha were called in as receivers on Friday by secured lenders Macquarie, and FTI Consulting as administrators by the company’s board.
The immediate cause of the collapse is not yet clear, but sources say a letter of demand from mining contractor Macmahon in mid-June could have been a trigger for a technical default on loan conditions.
The Australian understands the company had about $20m at bank at the time of its collapse, with its major issue a toxic hedge book that was only partly restructured as part of a $16.5m institutional placement in March. The company’s only major unsecured creditor is understood to be Macmahon.
Operations at the company’s Warrawoona gold mine in the Pilbara have struggled for consistency over the last year, but KordaMentha’s Richard Tucker said on Sunday the fundamentals of the company’s assets are “strong”.
But the major factor currently undermining Calidus’ financial performance appears to be the Macquarie hedge book, with a March presentation showing the miner was due to deliver another 78,000 ounces of gold over the next 18 months at a hedged price of $2370 an ounce – more than $1100 an ounce below the current spot price of about $3500 an ounce in local currency terms.
At the time Calidus owed Macquarie $69m on its secured facility.
Calidus’ March quarter production report shows the company produced 15,118 ounces at an average all-in sustaining cost of $2429 an ounce. The company had been expecting to produce 16,900 to 21,900 ounces in the June quarter, according to its last guidance, delivered with its March quarter production report.
Warrawoona was expected to produce 60,000 to 65,000 ounces next financial year.
Calidus’ debt restructure pushed back the delivery of about 21,250 ounces of gold into the hedge book from the current calendar year, which should have helped deliver more than $20m of free cash into Calidus’ coffers by allowing the company to sell at spot rates rather than into the underwater hedge book.
According to a March presentation, Calidus was due to deliver 5000 ounces into the hedge book in the June quarter, and then about 16,000 ounces in the second half of the year.
Mr Tucker said on Sunday the receivers plan to either sell the company’s assets or run a recapitalisation process, with its mine likely to continue operating as the receivers weigh their options.
Either outcome is unlikely to deliver much return to the retail shareholders that tipped in $6m to the company at 11.5c in May, however, or institutional holders that put in $16.5m in March.
Calidus’ collapse is likely to send shockwaves through the WA gold sector, given Calidus’ mining operations would have been generating solid levels of cash without the hedge book.
One industry source noted that the margin in the hedge book over the next 18 months would have been worth about the same as its debt to Macquarie, if spot prices held up around current levels and the company delivered on its promised production.
Calidus shares last traded at 11.5c.
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